Do Farmers have a Legal Right to Grow Cannabis?

December 22, 2016 | Geoffrey Marshall

In one case, ASA forced the California Highway Patrol to end its informal policy of confiscating the property of medical cannabis patients during traffic stops. Another ASA lawsuit stopped the California Department of Motor Vehicles from suspending the licenses of medical patients. “And as we were winning these lawsuits,” [Steph] Sherer says, “we started getting more traction in the legislature,” which gradually led to new protections for medical cannabis patients.

When Jackson County, Oregon, tried to ban medical cannabis cultivation on some rural land last April, farmers there adopted an unexpected defense: They threatened to sue for lost income. According to state law, local governments can’t stop rural landowners from engaging in agricultural activity without compensating them for the lost value of the banned enterprise.

These property rights laws are commonly invoked by developers, mining companies and other big businesses to get around burdensome regulations. But Portland attorney Ross Day, who is representing more than a dozen Jackson County farmers, says the law is tailor-made for cannabis.

A change in Oregon law that took effect last March formally defined cannabis as an agricultural crop. And that, says Day, means Jackson County can’t simply tell growers “no”. Instead, he says, the county “is either going to have to let them grow or is going to have to pay them not to grow.”

And given the potential income cannabis farmers could earn on that acreage, Day says, restricting cannabis “is going to be fairly expensive for Jackson County.”

The Jackson County lawsuit is one more sign of rapid change in the cannabis industry. In the early days of legalization, many cannabis operators went to great lengths to avoid confrontations with local authorities—even to the point of packing up and moving to friendlier jurisdictions.

Nowadays cannabis farmers are less willing to just melt away. Instead, they’re adopting some of the hardball tactics of bigger, more established businesses. One factor, of course, is that cannabis itself is becoming a bigger business.

Here’s another factor: These fight-or-flight situations are coming up more often. As more states have legalized, the growing presence of the cannabis industry has provoked an anti-cannabis counter-insurgency. We’ve seen this backlash mainly in rural regions such as eastern Washington, where several counties that had initially approved cannabis cultivation—and attracted millions of dollars in cannabis investment—subsequently tried to restrict growers by changing local zoning laws.

That counter-insurgency is also happening in other states, and in jurisdictions large and small, rural and urban. In the run-up to California’s vote on Proposition 64 last month, a number of counties and cities sought to exempt themselves from statewide legalization by enacting local bans or other restrictions. In Oregon, dozens of counties and cities have pushed back against state legalization by holding local cannabis referendums.

In November, residents in Marion County, Oregon—home to the state capital, Salem, and a swath of the fertile Willamette Valley—voted to ban production and sale of medical and adult-use cannabis in the county’s unincorporated areas. The vote, one of several in Oregon, came as a rude shock to the county’s prospective operators, including Golden Leaf Holdings, a major cannabis oil manufacturer that had already paid $3.3 million to lease land for cultivation and research. “It shut us out of the [local] recreational market, which was our original strategy,” said Beau Whitney, an executive with Golden Leaf, in an interview with Fortune. The company is now shifting its efforts to the more cannabis-friendly Portland market.

Pushing back against unfair laws

As with many aspects of cannabis law, this isn’t a black and white situation. Some of the local pushback reflects legitimate public concerns, such as grow operations being located too close to residential neighborhoods. There’s also uncertainty about state law; until this year, for example, Oregon’s farm-product protections covered only recreational cannabis, not medical. Most state cannabis laws give local jurisdictions significant leeway in how—and whether—to implement legalization. In Colorado, a city or county can opt out by passing a local referendum. Oregon goes a step further, allowing local bans in any county where 55 percent or more of voters rejected Measure 94 in 2014—a loophole available to 15 counties in the rural eastern part of the state.

But often, cannabis advocates say, local efforts to regulate cannabis are less about managing bona fide problems, such as odor, than about rejecting cannabis entirely. “The attitude – and I’ve experienced it all around the state – is that some people just don’t want other people growing cannabis in their neighborhood,” says attorney Ross Day. “The general sentiment is, ‘Not here.’”

That sentiment, advocates say, results in cannabis regulations that are often blatantly discriminatory. Vincent Sliwoski, a Portland attorney and expert on cannabis regulation—he writes at Canna Law Blog—says some of the new local regulations hold cannabis operators to higher standards than other agricultural operators face.

Case in point: In Clackamas County, just south of Portland, Sliwoski says, cultivation operations must be set back at least 100 feet from the operator’s property line, a rule that prevents small lot owners from operating cannabis farms. Yet other, arguably more noisome operations, such as hog farms or garlic farms, can site their facilities right up to the property line. Another example: Although Oregon law exempts farmers from having to get costly structural permits for greenhouses, Day says, Jackson County refused to grant that exemption to cannabis farmers–and then fined those not in compliance. In such cases, local regulations are simply expressing a raw imbalance of power. Because cannabis operators have historically lacked the resources or the community support to fight back, says Sliwoski, local authorities “feel like they can get away with being a little harder on pot farmers.”

That’s no longer a safe assumption. While most cannabis operators still prefer negotiation to litigation, going to court is becoming more common. Cities and counties may still be targeting “what they perceive to be the vulnerabilities of the industry,” says Henry Wykowski, a San Francisco attorney and one of the cannabis industry’s most successful litigators. (He led the successful defense of Oakland-based Harborside Health Center against a federal civil forfeiture case, which the feds dropped earlier this year.) “But there are people in the industry who are quite willing to stand up and fight back.”

Conservative lawyers defending cannabis farmers

This new aggressiveness has led the cannabis sector into unfamiliar territory, both tactically and philosophically. Some of the attorneys defending aggrieved cannabis operators are deeply conservative individuals with little personal attachment to cannabis culture. Day, for example, is a conservative Republican who admits that, until recently, representing cannabis farmers was “something I never would have imagined doing in a million years.” Dale Foreman, an attorney working with growers in Chelan County, Washington, is a former Republican state lawmaker and National Republican Committee member who once authored a book titled, “Crucify Him: A Lawyer Looks at the Trial of Jesus.”

What’s more, as cannabis operators fight back against discriminatory regulations, they’re often drawing on legal concepts seemingly at odds with cannabis’s more collaborative, go-along-to-get-along culture. Property rights laws have long been deployed not merely by big business, but also by hard-right anti-government activists. Consider another legal concept that cannabis operators are now relying on—so-called “freedom to farm” laws. These were originally meant to shield industrial farming activities, such as large-scale animal feedlots and chemical spraying, from nuisance claims by neighbors and from anti-nuisance regulations by local governments.

And yet, at their core, these legal concepts have a ready applicability to cannabis. “Freedom to farm” becomes a valuable legal protection, says Day, when cities declare cannabis cultivation to be in violation of local nuisance laws, as Grants Pass, Oregon did earlier this year. Similarly, the idea at the heart of the property rights movement—that government actions which reduce property value may themselves be illegal—is no less relevant for cannabis production than it is for pig farming.

Local governments have the right “to change the rules,” says attorney Dale Foreman, who is fighting new restrictions on cannabis farming in Chelan County, Washington. “But what they can’t do is change the rules, throw all these people out of business, and not pay the cost.”

The cost of the fight

As out-of-character as these legal adaptations may seem, they’re actually in keeping with the cannabis sector’s long history of innovative legal tactics. The first medical dispensaries—in California’s Bay Area during the late 1990s—were technically in violation of federal, state and local laws. They survived largely because advocates worked creatively with cities like San Francisco and Oakland on ordinances that were carefully worded to allow cultivation and distribution without tripping federal or state enforcement.

Later, when state law enforcement agencies began seizing the property of medical cannabis patients, advocates deployed more legal creativity. In the early 2000s, Americans for Safe Access (ASA) mounted a barebones litigation campaign targeting “the most outrageous cases” of regulatory abuse, says Steph Sherer, ASA founder and executive director.

In one case, ASA forced the California Highway Patrol to end its informal policy of confiscating the property of medical cannabis patients during traffic stops. Another ASA lawsuit stopped the California Department of Motor Vehicles from suspending the licenses of medical patients. “And as we were winning these lawsuits,” Sherer says, “we started getting more traction in the legislature,” which gradually led to new protections for medical cannabis patients.

The rise of adult-use cannabis has given rise to still more legal innovation. Where litigation over medical cannabis often focuses on “rights of access” for patients, adult-use litigation more typically centers on the economic rights of producers and sellers—hence the use of concepts such as property rights.

Yet inevitably, as cannabis advocates have developed new strategies, their opponents’ blocking tactics have become more creative. The huge investment required to start a cannabis business, for example, means entrepreneurs can be easily bankrupted by any regulatory change that delays them from opening and generating cash flow. A number of local governments have already exploited that particular vulnerability. Some jurisdictions have repeatedly enacted “emergency” moratoria, which can be devastating to cannabis entrepreneurs, says Crystal Oliver, a member of NORML in eastern Washington. “I don’t think the emergency rulemaking process was designed to be used with the frequency that it’s used on our industry,” she says.

Fighting regulations in court is costly, so some municipalities are gambling that even blatantly discriminatory regulations won’t be challenged. “Litigation against cities and counties is a real sinkhole, money wise, because you can very seldom recover your attorneys fees, even if you win,” says Sliwoski. “So most [cannabis operators] would rather up and move than litigate, even if they feel that they are in the right.”

That particular tactic may be losing some of its punch, though. Legal defense funds are emerging to help defray costs. Sympathetic attorneys like Day offer cannabis operators discounted fees. “I’m giving them a cut rate because I believe in it,” says Day, who has come to see the fight over cannabis as a fight over personal liberty.

Even when cannabis operators can afford to litigate, obstacles remain—not the least of which is federal prohibition. The Jackson County case, for example, is being delayed in part because Day can’t find an appraiser willing to assess the cultivators’ lost economic value. “Basically, they’re afraid to put their name on an appraisal involving a federally illegal activity,” he says.

That’s not gone unnoticed by the community of local regulators. Cannabis-unfriendly jurisdictions are carefully tracking the anti-cannabis successes of other, like-minded jurisdictions. After Jackson County enacted its ban, Day says, several other Oregon counties began using the same regulatory language. “It’s clear that the local governments are copying each other and saying, ‘Here’s a strategy that works.’”

The viral nature of local regulation is a key point. Because states give cities and counties considerable authority in regulating zoning and business activities, the confrontations we’re seeing in Colorado, Oregon and Washington State will almost certainly be replicated in thousands of local communities as the tide of legalization spreads nationally. That’s especially likely given the political compromises that are necessary to passing cannabis legislation. It’s worth noting that the reason Oregon allows local bans by counties with a 55-percent no vote is because that was the only way conservative state lawmakers would back statewide legalization. Given those political realities, says Henry Wykowski, the issue of local bans is something that will be fought and refought “case by case.”

Despite such prospects, some legal experts say these local counterinsurgencies are ultimately a rearguard action. As the cost and benefits of a legal cannabis market become more widely understood, even conservative municipalities may be less likely to throw up regulatory roadblocks.

Just important, advocates say, is the idea that many cannabis operators are on the right side of the law—a reality that will gradually play out in the courts. Just this week, for example, Jackson County’s attempt to make cannabis greenhouse operators obtain costly structural permits was struck down by Oregon’s land use board. In time, if cannabis farmers can rack up legal victories and establish precedents, local authorities may think twice before enacting discriminatory cannabis regulations. In that regard, the fact that local governments copy each other could ultimately work in the sector’s favor. “If we challenge Jackson County and win,” says Day, “other counties that are taking the same legal positions are probably going to back off.”